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Before you award a contract

7 July 2016

Contract failure due to a supplier’s inability to deliver can be a procurer’s biggest nightmare.

The negative consequences can be significant if the failed contract is critically important to an agency’s business objectives and/or presents serious risks to an agency, the economy or New Zealand.

Agencies need to complete due diligence checks and consider whole-of-life costs when procuring goods and services and making decisions to award contracts.

Conducting due diligence checks

Conducting due diligence checks can prevent you from selecting the wrong supplier.

Your due diligence checks should ensure that suppliers are

  • who they claim to be;
  • are financially sound; and
  • have the necessary capacity and capability to deliver against the contract.

When conducting due diligence checks, it is important to verify past performance. These checks are especially important with high risk and high value contracts, such as in ICT.

You can do reference checks or request for testimonials to check for past performance. Consider not awarding the contract to a supplier where performance issues have been identified.

If in doubt, consider checking with the Government Chief Information Officer, Treasury and New Zealand Government Procurement and Property.

Consider whole-of-life costing

Whole-of-life costing refers to calculating the total cost that your agency will pay over the life of the contract.

This requires taking into account all costs over the life of a contract, such as maintenance and repairs, rather than just the initial purchase price.

What else you can do to when considering whole-of-life costing:

  • Ensure that technical specifications are achievable and delivered.
  • Make decisions on the basis of value for money – not the lowest price.

Resources

Here is some guidance you can refer to:

 

Last updated 12 July 2016